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AI-Powered Skill Classification: Mapping Technology Intensity in the German Labor Market

Author

Listed:
  • Grenz, Sabrina

    (Utrecht University)

  • Gregory, Terry

    (LISER)

  • Lehmer, Florian

    (IAB Nuremberg)

Abstract

The rapid evolution of technology is reshaping labor markets by altering skill demands and job profiles. This paper introduces a novel skill-based measure of occupational technology intensity -- the Occupational Technology Skill Share (OTSS) -- that distinguishes between manual, digital, and frontier technologies. Using natural language processing, generative AI, and supervised machine learning, we develop an AI-powered skill classification that enriches occupation-linked skill labels with standardized GenAI-generated descriptions and structured indicators of technological content, enabling transparent classification by technology intensity. We compute OTSS for all occupations in the German labor market. For the average worker in 2023, manual technologies account for the largest share of skill content (42\%), followed by digital (38\%) and frontier technologies (20\%). Frontier technologies remain concentrated in specialized occupations, while digital technologies are widespread. Linking these measures to administrative data from 2012-2023 shows a broad shift from manual and digital toward frontier skills across occupations, and reveals a U-shaped relationship between changes in frontier skill intensity and employment growth.

Suggested Citation

  • Grenz, Sabrina & Gregory, Terry & Lehmer, Florian, 2026. "AI-Powered Skill Classification: Mapping Technology Intensity in the German Labor Market," IZA Discussion Papers 18415, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18415
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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